A 2016 study by Vocalink found that 54% of British, and 64% of Italian Millennials, agreed with the statement ‘I’d prefer to be able manage all of my accounts on one mobile app/ one website’.
Although the Payment Services Directive 2 (PSD2) is a less than catchy title, if you too agree with the above statement, then it is something you should at least be taking note of, if not celebrating, as it is nothing less than the dawning of a new era.
The PSD2 is actually an update to an original directive (the PSD) that was passed in 2007 by the EU parliament. It was originally designed to provide sufficient regulation and control over the financial services industry.
In 2015 it was decided that the industry had developed so much, and the products on offer were so different to those that had been available in 2007, that an updated directive was needed. Thus, the PSD2 came to be.
One of the most important updates that the PSD2 offered was the tightening of regulations surrounding data security, in order to ensure that all private customer data is held and processed in absolute safety.
The reason the PSD2 is so revolutionary is because it gives you back control over your own money. As an account holder your transactions are now your property, and not your bank’s. This means you can now request that your transactional history be shared with authorised third parties, who can provide you with a full range of new financial services.
It also totally transforms the current, out-dated, banking model - where banks have full control over all financial data - and opens up the space to new and better business models. The way we relate to our money will never be the same.
There are two main new services that will be introduced through the implementation of the PSD2.
- Payment Initiation Service Providers (PISP)
A PISP can ask for permission to connect to a bank account and then make payments on the user’s behalf from their bank account. You can use this to pay all your bills and invoices, as well as allowing certain online stores or shops where you regularly shop to connect to your bank account so you no longer need to enter credit card data. Cutting out the middle man improves security and drives down costs.
- Account Information Service Providers (AISP)
This is where Oval comes in! AISPs provide you with an aggregate view of your spending from multiple different accounts. It means you get a holistic overview of your daily finances from all your different banks in one easy place. This is designed to help you better manage and maintain your money.
In terms of Oval, this joined up approach to your spending will give you a clearer idea of where your money is going. It will also allow us to offer you better savings and investment services tailored to suit your needs.
The short and sweet answer? Everyone.
Everyone who is a consumer and a user of financial services. After all, PDS2 was designed specifically to empower the individual by giving them a clearer, easier way to view and access their financial status in order to make better financial decisions.
Introduction and non-compliance
Officially, 15th September 2019 is the compliance deadline set by the EU Parliament. After this date all banks will need to be fully inline with PSD2 regulations.
Before that date, there has been a slow roll out of the new system, which will continue right up until September.
According to a survey by Tink earlier this month, 41% of banks failed to meet one of the first PSD2 deadlines of 2019, which required them to provide a testing environment for third-party providers. There is concern that one missed deadline will create a knock-on effect. However, that should not from the 59% of banks who have managed to meet the deadline.
Change is always slow, and there may well be a few growing pains, but the demystification of banking has begun.